Quote:
Originally Posted by Slava
I disagree though, largely because we heard the same arguments after 2008-09. People were predicting $5000/oz gold because of hyper-inflation and there was "no way they could get that money out of the system". Well, it's easy to see now that we weren't dealing with hyper-inflation, they did get the money out and in fact what we saw was issues with deflation.
But more than this, its odd to blame the BoC. In a country where we routinely see that people have terrible financial literacy, the thought is they're actively paying attention to the comments Macklem made and making life decisions based on them? Gimme a break. People *might* look now, based on the newsworthy inflation issue, but even then I think that most Canadians go about their day and pay zero attention to what the Governor of the BoC has to say.
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I think the big difference between 2008-2009 and the covid response was where the money went. 2009 was basically all quantitative easing, so most of the money went to investors who kept it as investments. Covid was direct transfers to people, and once consumers could get out and spend they did, so the velocity was higher.
But really, the crux of my argument isn't that he should be 100% accurate predicting the future. And 2009 is n=1 for "money supply increases not causing inflation". If we go further back there are plenty of examples of big increases in money supply immediately followed by big inflation. I'm not saying he should have been sure that would happen, but he absolutely would have been aware it was a possibility.
If I might have to work late I dont promise to pick up my kids from school. At the time he made that promise there was a good chance he would have to break it, so he shouldn't have made it.
I'm not saying the chance was 100% (because that is hindsight bias) but with all the inflationary actions being taken worldwide it wasn't a tail risk either.
I'm not a gold bug/prepper/inflationary doomsayer (at all, actually, I mostly don't do macro), but I think the person in charge of our monetary policy should be able to think probabilistically. More than one future is possible.